Buy-to-let mortgage activity saw drop in April

by Gary Whittaker

Buy-to-let activity fell in April, with the recent tax changes for landlords being blamed for the fall in the sector. The latest figures from Connells Survey and Valuation show that the number of properties bought for renting purposes stood at just seven per cent last month.

April's buy-to-let activity has a five-year average of 13 per cent, with this year's purchases falling well below this. It even fell below last year's activity, which was affected by the introduction of the stamp duty surcharge.

The recent changes to tax mean that landlords are now only able to offset 75 per cent of mortgage interest payments against rental income, which is 25 per cent lower than in March. These changes were introduced in a bid to slow the growth that the buy to let industry had experienced in recent years in a bid to help more first-time buyers onto the property market. 

According to Connells' findings, buy-to-let valuations have made up less than ten per cent of market activity, falling to the lowest level in April. It suggests that smaller private landlords haven't been investing in the sector as much as previously, which could harm the supply of rental properties available.

John Bagshaw, corporate services director of Connells Survey and Valuation, said: “Buy-to-let used to be seen as a viable way to gain additional income or to fund retirements, but the gradual removal of buy-to-let mortgage tax relief will make it much harder for the man on the street to invest.

“Having said that, buy-to-let valuations only fell one per cent month-on-month and so the comparison with the five-year average doesn’t always tell the whole story.”

Figures from the Council of Mortgage lenders revealed that the number of buy-to-let mortgages advanced in March this year dropped by 78 per cent compared to the same month in 2016, with just 6,500 loans given out.

However, first-time buyer valuations increased to 34 per cent in April, which was two per cent higher than in March, suggesting that the changes to tax might be having the desired effect.

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23-May-17General Lettings News